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August 7, 2017

US targets Hezbollah finances with new sanctions law | Executive Magazine

In late July, the latest round of American legislation targeting Hezbollah arrived, despite Lebanese government and banking officials downplaying rumors of it just a few months ago, as Executive reported. The Hizballah International Financing Prevention Amendments Act would supplement a 2015 law curbing the group’s access to banking systems, and is the latest legislative effort to freeze Hezbollah’s finances.

The United States alleges that Hezbollah operates global terrorism networks and engages in criminal activities, including drug trafficking and money laundering. The Party of God, said President Donald Trump in remarks after a White House meeting with Lebanon’s Prime Minister Saad Hariri on July 25, “is a menace to the Lebanese state, the Lebanese people, and the entire region.[…], threatens to start yet another conflict with Israel, …[and] is also fueling the humanitarian catastrophe in Syria.”

The Americans seem to be ratcheting up the pressure on Hezbollah through law enforcement actions and vis-á-vis Iran. But it is Lebanon’s banking sector, and thus its economy, that has local government and banking officials concerned. The forced closure of the Lebanese Canadian Bank in 2011 is a not so distant memory and the question now is what will President Trump, whose behavior is viewed as erratic and impulsive, do with regard to this “menace”?

Tightening legislation

The new legislation arrived on Capitol Hill as an amendment to 2015’s Hizballah International Financing Prevention Act (HIFPA). HIFPA was aimed at curbing Hezbollah’s ability to access the international financial system and disrupt foreign financing to Hezbollah, that the Americans believe flows through Lebanese banks.

The amending legislation would further restrict Hezbollah’s ability to raise funds and recruit, increase pressure on banks to not do business with Hezbollah, and punish foreign states for supporting Hezbollah. The legislation was only introduced to House and Senate committees at the end of July, but in its current form it gives the president wide latitude to sanction any person or entity he deems supportive of Hezbollah, financially or otherwise, to deny individuals entry to the United States, revoke already-issued travel permits and visas, and to sanction key figures within Hezbollah, or anyone deemed affiliated to Hezbollah.

It is not clear when Congress will vote on this amendment, and we do not yet know what sanctions might result. If the legislation is passed and signed into law by President Trump, his administration could issue sanctions against Lebanese financial institutions.

The notion stokes fear of past American actions, as one vice president of investment banking at a local bank, who spoke on condition of anonymity because he was not authorized to comment publicly, wrote to Executive in an email. “Other than the effect of lower confidence in the banking system, which would probably be external rather than internal, will we have more cases like the Lebanese Canadian Bank which was closed following similar sanctions?” A senior official at Lebanon’s central bank (Banque du Liban), who also insisted on anonymity, told Executive in Junethat he feared a unilateral severing of banking relations. “What really scares me is banks and central banks chickening out. When you’re hit with sanction after sanction they begin to ask, ‘Why should we do business with Lebanese banks?’”

When it comes to Hezbollah’s finances, the United States believes the group manipulates the international financial system to move money between Lebanon and other countries. Hezbollah uses that money, the US alleges, in part to finance its military excursions in Syria, its terrorism activities globally, and to fund its political agenda and social welfare programs at home.

In 2015, Hassan Nasrallah, Hezbollah’s leader, vehemently denied American allegations that the organization was awash with drug money and dared the United States to “show me the evidence.” In another speech in June 2016, Nasrallah said the organization was financed purely through the aid of its patron, Iran. “Hezbollah’s budget, its income, its expenses, everything it eats and drinks, its weapons and rockets, come from the Islamic Republic of Iran,”he said, according to remarks published by Al Arabiya English.

Building pressure

Despite Hezbollah’s denials, American law enforcement have tied the group to illicit activities. In February 2016, the US Drug Enforcement Administration (DEA), alongside European counterparts, dismantled a global drug trafficking and money laundering network that it alleged was responsible for washing hundreds of millions of dollars in drug proceeds overseen by Hezbollah, as Executive reported. And this past June, it was Hezbollah’s External Security Organization (the Islamic Jihad Organization, a named entity in the proposed legislation) that the US Justice Department accused of backing two naturalized American citizens plotting terrorist attacks on US soil.

The US might also be attempting to pressure Iran and build international support for action against Hezbollah. On July 19, US Ambassador to the United Nations Nikki Haley accused Hezbollah of a weapons buildup on the border with Israel, according to an AFP story cited in Al-Monitor. The ambassador’s remarks followed a resolution by Congress in late June urging the European Union to designate Hezbollah, in its entirity, as a terrorist organization. In 2013 the EU designated Hezbollah’s military wing a terrorist entity, but not the organization as a whole.

Also in June, the US House of Representatives introduced the Iran and Hizballah Western Hemisphere Prevention Act of 2017. The bill is a continuation of the policy set in 2015’s HIFPA law, and builds on a 2012 law limiting Iran’s ability to penetrate into the Western Hemisphere. In late July, congress voted for new sanctions that would rollback the financial relief Iran received as part of the nuclear deal it agreed to during the Obama Administration. With billions of dollars from sanctions relief, a late-July statement from the House’s Foreign Affairs Committee read, “Iran is strengthening the terrorist group Hezbollah.”

These developments came as Hariri arrived in Washington for his meeting with Trump. Following their meeting, Hariri said Lebanon and its central bank had always cooperated with American sanctions imposed on the country’s banks, and always would. The US president, for his part, said he would be deciding on his anti-Hezbollah strategy very soon. And so we wait for the law and for the President’s answer.

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